Reality FDI in Africa in 2014Africa’s real estate and hospitality boomentices investorsIn 2014, opportunities in RHC attracted 59 projects, up 11.3%.But the modest increase in project numbers masks the scale andimportance of these investments, which now account for 43.8%of capital investment inflows and generate 33.6% of FDI jobs inAfrica. The surge was especially evident in Egypt, which was thetarget of more than 30% of Africa’s RHC investments in 2014.Investors from the UAE launched 30.5% of these projects, withSouth African companies also active.Investment in the RHC sector is gaining traction. Demand forreal estate is growing as Africans become more numerous, increasetheir spending power, and move to cities. 27 Oxford Economicsprojects that Africa’s urban population will grow at least twiceas fast as those of any other continent until 2030. 28 Africa ishome to four of the world’s megacities: Cairo, Johannesburg,Kinshasa and Lagos. Many others are expanding rapidly, includingAbuja, Accra, Addis Ababa, Luanda, Lusaka, Maputo and Nairobi.Growing urban populations need homes and, as they travel more,hotels and restaurants also serve an influx of business travelersand tourists. As economies grow, and manufacturing and servicesexpand, demand for industrial, distribution, and retail real estateexpands, along with demand for modern offices.Fixing Africa’s infrastructure deficit and rising demand fromits growing population offers ample opportunities for foreigninvestors in infrastructure development. Poor roads, ports, raillinks and connections slows economic growth and hampersbusiness productivity. 29International hotel chains are also striving to meet burgeoningdemand in Africa, where supply of hotels in all categories isoften inadequate. With few properties or chains to buy, globalhotel groups have largely to rely upon organic growth. Accordingto the UN World Tourism Organization, international arrivalsin Africa exceeded 50 million in 2012 and are expected to top85 million by 2020. Increasing regional and international tradein Africa has buoyedCase studyMarriott InternationalAfter completing the acquisition of the South-Africanbased Protea Hospitality Group, Marriott Internationallast year became the largest hotel company in Africa.In October 2014, the company announced plansto expand its African presence further, from 120properties across 10 countries to 150 properties in17 national markets by 2020. It also intends to add10,000 more African associates to its workforce.These developments will involve an outlay of aboutUS$1.5b by Marriott and its real estate partners acrossthe continent.Sources: “Marriott International Completes Acquisition of ProteaHospitality Group; Becomes the Largest Hotel Company in Africa,”Marriott website, news.marriott.com, 1 April 2014; “MarriottInternational’s Commitment to Expansion Across Africa GathersMomentum,” Marriott website, news.marriott.com, 2 October 2014.the number of business travelers, prompting leading hoteliersto develop ambitious plans. 30 For example French hotel groupAccor has 20 projects totaling 3,600 rooms under developmentin SSA. 31Investors line up to service rising consumerdemand• Technology, media and telecommunicationsAlmost a fifth of African investment projects in 2014 were inTMT. South Africa was the top destination, followed by Nigeria,Morocco and Kenya. US companies more than doubled their FDIprojects in this sector during 2014. Business technology groupIBM announced in February 2014 that it will open innovationcenters in Morocco and Nigeria, working on big data, analytics27 “High stakes for high reward? Real estate funds come to Africa,” Reuters website, reuters.com,accessed 19 January <strong>2015</strong>.28 Bright continent: The future of Africa’s opportunity cities, Oxford Economics, 2014.29 “African Leaders, Business Community Push for Financing of Priority Regional InfrastructureProjects,” World Bank website, worldbank.org, accessed 24 April <strong>2015</strong>.30 “Africa is new battleground for global hotel industry,” Financial Times website, ft.com, accessed20 January <strong>2015</strong>.31 “South Africa,” Accor website, accor.com, accessed 20 March <strong>2015</strong>.22<strong>EY</strong>’s <strong>attractiveness</strong> <strong>survey</strong> Africa <strong>2015</strong> Making choices
www.ey.com/<strong>attractiveness</strong>and cloud computing. 32 Mobile subscriptions and data trafficare rising strongly in Africa, opening up opportunities to supplyeducation, banking and health care via the internet, adding to thesector’s appeal. 33• Financial servicesFinancial services is the second-largest sector by projectnumbers, and increasingly driven by intra-African investment.Last year, about 40% of cross-border financial services projectswere launched by African companies.Regional banks and financial services providers are increasinglyadopting a pan-African approach to capitalize on a veryunderdeveloped market: only 25% of adults in SSA have bankaccounts, against a global average of 51%. Among intra-regionalinvestors, South African firms led with 16 projects. The country’slargest banks, Barclays Africa, FirstRand, Nedbank and StandardBank have all pursued Africa-wide expansion strategies over thepast several years, 34 as have Ecobank, headquartered in Togo, andMorocco-based Attijariwafa bank.• Consumer products and retailForeign investors launched 103 CPR projects in 2014, making itthe third-favorite sector for FDI. These brought about nearly twiceas many jobs as those in 2013, with the average CPR projectnow creating 576 jobs, up from 237 in 2013. This year, WesternEuropean firms outpaced rivals from Asia-Pacific to becomethe leading initiators of CPR projects. Egypt was the leadingdestination, with 19 projects, but CPR projects in Kenya, Nigeriaand South Africa declined.32 “IBM Fuels Innovation and Entrepreneurship in Africa,” IBM website, www-03.ibm.com/press,7 February 2014.33 “Lower-cost handsets help drive internet revolution,” Financial Times website, 5 October 2014,ft.com, accessed 5 February <strong>2015</strong>.34 “Expanding financial sector draws interest from investors,” Financial Times website, ft.com,5 October 2014, accessed 5 January <strong>2015</strong>.<strong>EY</strong>’s <strong>attractiveness</strong> <strong>survey</strong> Africa <strong>2015</strong> Making choices 23
Change language